The Federal Reserve opted to hold its benchmark interest rate steady this week, citing growing uncertainty around inflation and employment as the war in Iran continues to disrupt global energy markets.
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In a decision that included four dissents, policymakers maintained the federal funds rate at a range of 3.5% to 3.75%. Officials pointed to rising risks stemming from higher energy prices and ongoing geopolitical instability.
Jerome Powell said the U.S. economy remains stable overall but acknowledged mounting uncertainty tied to the conflict in the Middle East.
“The economic outlook remains highly uncertain, and the conflict in the Middle East has added to this uncertainty in the near term,” Powell said. “Higher energy prices will push up overall inflation — beyond that the scope and duration of potential effects on the economy remain unclear.”
The Federal Open Market Committee signaled continued caution, as policymakers balance their dual mandate of controlling inflation and supporting employment. While economic growth was described as “solid,” rising oil prices have complicated the outlook.
Brent crude prices have surged sharply during the conflict, increasing inflationary pressures and raising concerns about slowing economic growth. Despite this, the Fed maintained a bias toward easing, though some officials pushed back.
Three dissenting policymakers opposed including an easing bias in the policy statement, while Governor Stephen Miran favored a quarter-point rate cut.
“The center is moving toward a more neutral place,” Powell said, referring to the committee’s evolving stance. “That’s sort of what markets are saying too.”
Powell also addressed his future at the central bank, confirming he will remain on the board of governors after his term as chair ends in May. He emphasized the importance of maintaining the Fed’s independence amid political scrutiny.
“The institution is being battered,” Powell said, adding “we’re having to resort to the courts” in order to ensure monetary policy is conducted without political interference.
“We’ve been successful so far, but that’s not over — none of that is concluded yet,” he said.
Powell added that he plans to remain in his role as a governor until ongoing legal matters are resolved.
“I will not leave the board until this investigation is well and truly over with transparency and finality,” Powell said. “I plan to keep a low profile as a governor.”
The Justice Department recently suspended a criminal investigation into Powell related to Federal Reserve building renovations after a court blocked subpoenas tied to the probe.
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Despite recent volatility, Powell highlighted the resilience of the U.S. economy in the face of repeated global disruptions, including the pandemic, supply chain shocks and geopolitical conflicts.
“It’s been remarkably resilient for some years now,” Powell said. “The U.S. economy has just powered through shock after shock, and consumers are still spending.”
However, recent labor data shows signs of weakness, with employment growth slowing after a decline in March. The uncertainty leaves policymakers weighing whether to prioritize inflation control or job market support.
For now, the Fed appears committed to a cautious, wait-and-see approach as it monitors economic conditions and the evolving impact of the Iran conflict.
Originally reported by Jim Tyson, Senior Reporter in Construction Dive.
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